Who Makes the Cut — How We Select Companies for Our Impact Investing Portfolios

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We know that socially conscious investors do their research—a lot of research—before deciding on an impact investing portfolio that can help them to achieve financial returns while leaving the world a better place for future generations.

That’s why we also do our research — a lot of research — on every company we select for our impact investing portfolios.

We do that through a rigorous series of analytical screens and a nimble interpretation of the data by our expert investment team.

Here’s a look at how we decide which companies make the cut into our impact investing portfolios.

We choose impact investments that lead to global sustainable development

We measure impact investments based on the percentage of revenues being generated from a company’s products or services that contribute to the global sustainable development goals defined by the UN’s 2030 Agenda for Sustainable Development.

Ultimately, we want to have companies in the portfolio that are contributing toward sustainable development goals.

Mike Thiessen, Director of Sustainable Investments at Genus

The process starts with an organization called Sustainalytics, which provides us with a list of the 200 most impactful companies around the world. “These are public companies that are quite large — at least $1 billion in market value,” says Thiessen.

Then, Thiessen and his team look at data supplied by MSCI—an investment research firm that ranks companies based on revenues contributing to the UN Sustainable Development Goals. If there are companies on the MSCI list that didn’t make the cut with Sustainalytics, they’re added to our master list.

“And from there, we apply our own sustainability screens, because there are going to be some companies that are really high impact but might have had some controversies,” says Thiessen.

Helpfully, MSCI has developed a colour-coding system for such controversies, ranging from green (no recent controversies) to red (one or more very severe controversies), which we take into account before making a final call.

Our goal is to have an average of 50% or higher positive net impact for each of the companies included in our impact investing portfolios; some impact investments, like Vestas Wind Systems, rank closer to 100%.

Optimizing impact investment selections with cutting-edge software

After all the filtering, data is put into our optimization software, along with several financial models, and our team ranks each of the impact investments based on factors such as profitability, company growth and stock price momentum. “We’re trying to maximize the weighted average ranking in the portfolio,” Thiessen says. “With 200 companies to consider, I then go in, once the optimization software has met all those constraints, and select the companies for approval by the CIO.”

At the start of each month, we do a full rebalance of our impact portfolio funds, following the release of fresh data from Sustainalytics and MSCI.

And given the dynamic nature of today’s economy, we are constantly evaluating and rebalancing the impact portfolios. “Sometimes there is something that’s happened in the news or something political that the software hasn’t taken into account, so we need to address that,” says Thiessen.

How the pandemic shifted our impact portfolios

When COVID-19 hit last spring, our senior leadership team met to figure out how to respond with its investment strategy. (We also started a weekly video series to address client concerns throughout the pandemic.)

From an impact investing perspective, we decided how to respond to the pandemic within our impact portfolios. “Our team talked a lot, and we decided that we were going to focus more on healthcare and technology,” says Thiessen.

Investments that reflect this shift include Abiomed and Regeneron in the healthcare space — both of which rated over 80% in their net impact scores — and technology companies Zoom, Nvidia, ServiceNow and Citrix Systems.

But no matter what’s happening with the economy, we also dive deep into the quality of each company we invest in — and the variability within each sector. “Depending on the sector that you’re in, depending on the country that you’re in, we weigh those factors differently,” says Thiessen. 

As powerful as our models are, it’s ultimately our expert team making final calls — and balancing portfolios that are built to achieve our impact investors’ goals.

Learn more about the impact of your portfolio or get in touch to chat about how we can help increase your positive net impact.

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Client impact

“Graduating from a big bank to Genus was one of the best financial steps we've ever taken. Genus has delivered reliable asset growth despite our moderate risk tolerance. As our financial security has grown, we've also been the beneficiaries of a great client experience. The company's communications have been consistently transparent and informative, including educational webinars and a well-designed web portal where we can track investments daily. Most importantly to us, our portfolio manager has always responded swiftly and thoroughly to our questions and requests. ”
Martin T.
"Having relatively diverse financial goals and needs, along with a slight reticence regarding the stock market, Genus skillfully addressed all of our concerns, and put together a truly exceptional plan: Fossil free funds and a diversified investment portfolio, check; An effective Impact investment portfolio that coincides with our hopes and dreams for a better world, check; Professional advice and assistance to create a donor advised charitable fund with immediate charitable receipts for tax purposes, check. Returns? Way beyond our expectations! We even had some fun along the way and certainly enjoyed an incredible two-year start to what will be a satisfying long-term relationship with Genus."
Marc B.
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Chris H.
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Bob Q.
“For over 15 years, I have provided selection and performance evaluation of multiple investment managers for a significant family office. Leslie and Genus have been foundational for me in my role. I have always found Leslie and her colleagues to be insightful and proactive, and found the performance of their portion of the portfolio to be well above benchmarks. And they have been a great pleasure to work with.”
Douglas H.
“Genus is a very innovative firm. I am pleased to invest in their Fossil Free and Impact strategies that help me invest in line with my values.”
Marnie C.
“Great team of professionals. Excellent website and reporting. Responds to inquiries promptly. Very pleased with the process of changing from another company to Genus as well. Kudos.”
David L.
“Genus consistently provides a good, clearly explained, comprehensive picture of the general economic and financial situation, along with an excellent account of the investment decisions made in relation to this. Genus’ equally strong concern with clients’ questions and requests for further information is also a very important part of the service it provides.”
Allan S.
“Back in 1992 when I found myself at fifty with a substantial amount of money to invest, I knew just one thing — that I didn’t want to contribute to tobacco companies, arms manufacturers, or oil. But over the ensuing years the options for socially responsible investing have become far more sophisticated and I’m very happy that this is a big part of the Genus approach. I also very much appreciate the long-term relationship with my portfolio manager, Mary Lou.”
Ann P.

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